How Does My State Impact My Taxes?

Dr. Jay Zigmont, PhD, MBA, CFP®

As we've already discussed, Childfree Americans pay a lot of different taxes, and this includes those charged not just at the federal level, but also at the state and local level. So there's really no escaping taxes in some form or another, even if you move to one that does not charge state income taxes (there are nine: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming). You'll have to pay into the state coffers in other ways. Let's discuss a few tax considerations to make based on where you live.

Sales Taxes, Property Taxes, & Beyond

With 50 states (and Washington DC), there's a lot of tax laws to wade through. Sales tax is a common way you'll be charged in most places; you're charged sales tax on many of the items you purchase, and if your income is less than $100,000 a year, you'll pay a higher percentage of that income in sales tax. Five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) don't charge sales tax at all, and make up income in other ways (for example, New Hampshire, which also doesn't charge income tax, has extremely high property taxes).

Property taxes can vary widely from state to state; to use a real-life example, I moved from Connecticut to Mississippi, and paid $12,000 per year in property taxes on a $450,000 home in CT. But I owes just $1,200 a year on a property of the same price in MS (although that home came with more land and a lake!).

What if you're a "snowbird" and maintain residency in more than one state, or even just like to live a nomadic lifestyle and frequently change locations within the U.S.? State taxes of all kinds can get complicated fast.

Talk to a Professional

If you're considering moving states to pay less in taxes, it's best to consider your entire financial picture to decide. For example, this could include how your retirement funds will be taxed when it's time to stop working or how much tax you'll owe on large purchases like vehicles. It's never a bad idea to talk to a tax professional or a Certified Financial Planner about planning for taxes and optimizing the percentage of your income you pay.
Jay Zigmont, PhD, MBA, CFP® is the Founder of Childfree Wealth, a life and financial planning firm dedicated to helping Childfree and Permanently Childless people. Dr. Jay is a CERTIFIED FINANCIAL PLANNER™, Childfree Wealth Specialist, and author of the book “Portraits of Childfree Wealth.” Dr Jay is the co-host of the Childfree Wealth Podcast. His Ph.D. is in Adult Learning from the University of Connecticut.

He has been featured in Fortune, Forbes, MarketWatch, Wall Street Journal, New York Times, Business Insider, CNBC, and many other publications.